Questions of Cash – August 2015

Q  I flew from London to Ibiza in May to take part in a charity bike ride for Great Ormond Street hospital.  It was a bank holiday weekend, so direct flights from London to Ibiza were too expensive. I halved the cost of the fare by breaking up the journey with a flight from London to Madrid with Norwegian and a flight from Madrid to Ibiza with Vueling.  The Norwegian flight would get me into Madrid for 13:35 and the Vueling flight was scheduled to leave at 17:25. This was booked and confirmed on 3 March.  But on 15 April, Vueling sent me a message saying it had moved the flight time to 09:50. This was before I landed in Madrid.  I phoned and requested to be put back on the original flight. I was told the 17:25 flight no longer existed.  I was offered another flight at 11:00, which also did not work for me, or the following day, which was too late for the charity cycle event.  I have been offered a refund, though I have not received it yet.  I then had to cancel the Norwegian flight and book a replacement flight for £150 from Stansted to Ibiza with Ryanair.  My travel insurers, Columbus, have been brilliant and promised to pay out for the money I lost on the Norwegian flight and the costs for rebooking a direct flight with Ryanair.  But it needs proof from Vueling that they’ve changed the flight times and an explanation as to why.  Vueling’s representatives will only say they don’t know.  In the meantime, Columbus can’t do anything to help me. CT, London.

A. A spokeswoman for Vueling – part of IAG, which also owns BA – apologised for the flight cancellation, but said it was unable to provide a reason for the cancellation and that it “cannot provide a letter” to assist you with your insurance claim. She added that it has now refunded the cost of your flight with Vueling. You have confirmed receipt of this payment and, like us, you again asked for an explanation for the cancellation, without success.  A spokeswoman for Columbus Insurance said:  “We understand that [the reader] is making two claims on her travel insurance policy.  One for the cost of a Norwegian flight from London to Madrid which she cancelled due to her connecting flight from Madrid to Ibiza with Vueling changing its original flight time from 17.25 to 9.50am. The second claim is the cost of a flight which she has booked with Ryanair and takes her direct from London to Ibiza.  Columbus has investigated thoroughly the circumstances surrounding the claims. Unfortunately their investigations have shown that this particular circumstance is not covered under her travel insurance policy. They understand that the situation was not within [the reader’s] control and, whilst this is an event not normally covered by travel insurance, as a gesture of goodwill they would like to offer to reimburse [the reader] the cost of the Ryanair flight which she has booked to take her from London to Ibiza, less the policy excess.”  This is not consistent with the information you say was given to you by Columbus, but the insurer is adamant that it will not meet the costs of the Norwegian flight as well.  We requested Columbus to again review its decision. It did this and reiterated its position, its spokeswoman stating: “Columbus Direct has reviewed the case again and believe that a decision not to pay any claim would accurately represent the cover provided by a travel insurance policy.  Section 11 of the policy (Travel Delay/Missed Connection) states that cover is provided where travel was affected by a strike, adverse weather and mechanical breakdown only.  The reasons stated for making a claim are not covered under this section and therefore Columbus would not be required to consider payment in this case.” Consequently, you have been reimbursed for both the Ryanair and Vueling flight costs, but not the Norwegian flight that you were unable to use.

Q. I have a question about capital gains tax. If we sell our buy-to-let property and re-invest the money in another buy-to-let property more conveniently located, is CGT still payable?  We haven’t, after all, taken the money out of the ‘business’.   If so, would we have to buy the second property in the same tax year?  The plan is to sell for about £100,000 a property we bought jointly for £40,000, re-investing the proceeds in another property nearer to where we live to make management easier.  If CGT is payable, would we both be able to claim the £11,000 tax-free allowance on the profit? RH, by email.

A. Gill Smith, head of private client services at accountancy firm Moore Stephens, answers: “A buy-to-let property is viewed as an investment, not as a business asset (unless used for furnished holiday lettings).  Therefore, assuming this has always been a rental property and you have never lived there, any gain made will be subject to capital gains tax and cannot be rolled over into another property.   On the basis that the property is held jointly then the gain is divided between the two of you.  The good news is that you each have an annual allowance of £11,100 to set against the gain (assuming that there are no other capital gains to utilise these).  Additionally if either of you have any unutilised income tax 20 per cent rate band in the year, then that amount of the gain will only suffer capital gains tax at 18 per cent rather than the higher 28 per cent rate.  Also do not forget that the cost of the property for capital gains tax purposes will include costs of acquisition such as legal expenses and stamp duty land tax and also the cost of any capital improvements to the property.  The selling price can be reduced by expenses of sale, which again include legal costs and estate agent’s fees.”

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